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The Penny Gap says that if your service is actually free, it will have a much greater uptake than one that is merely very very cheap. Rather than being a smooth curve up the value chain, there’s a quantum shift between “free” and “costs anything”. I think this is largely due to the implicit value factoring of the “cost” (in effort) of the transaction. If you could just wave your hand and pay a penny for something without getting out your credit card number or typing in your password, it seems like this gap would largely disappear.

There’s a similar effect at play when dealing with “unlimited” services. If you have to pay for usage, it takes a lot of mental effort to add up everything you’re paying and make sure you’re not over a certain amount. If you don’t, and have an unlimited plan, that mental effort goes away. Even if the unlimited service is more expensive than you’d pay with metered service, there’s less hesitation to use it because you never have to worry about keeping track of it. I feel like this effect is less prominent on services that give you constant feedback about how much you’ve used. Presumably the extra security of insurance of not ever going above a certain limit has some value to it as well.

Free and unlimited are obviously closely related, mentally and emotionally. I’ll have to think about this some more.